Prost! Selling German Beer to Americans

An Interview with German Beer Marketing Guru, Horst Dornbusch

Oktoberfest
A German Oktoberfest celebration. Johannes Simon/Getty Images

Where is All the Good German Beer?

Any list of top beer countries has to include Germany. Historically and in modern times, good beer is always connected to Germany and Germans, and many of the words associated with beer and brewing used internationally are German. Germany and beer are inseparable in the minds and traditions of beer lovers all over the world.

Despite all of this, beer imported from Germany to the U.S., one of the biggest beer markets today, is relatively small.

A quick survey of the shelves of most beer sellers will reveal lots of imports — Mexican, Canadian, Dutch, Belgian, British — but only a few German beers. And, invariably, the German representatives are dominated by Pilsner and wheat style beers and only from a few of the biggest German brewers.

This is something that Horst Dornbusch spends a lot of time thinking about. Dornbusch is a consultant to German and other European beer brewers and raw material producers. He makes it his business to try to understand why these discrepancies exist and find ways to rectify them. “I try to instill a fairness into the game,” he says. “I’m basically on the side of two groups. I’m on the side of the producer because they sweat their tail off to make a fine brew. And I’m on the side of the consumer.”

The Vast Styles of German Beer

Whether they realize it or not, the lack of German brewed beer in the U.S. market is really a disservice to beer lovers there.

Beer and brewing are not only deeply rooted in Germany, but German beer is some of the best in the world.

Many U.S. drinkers, while familiar with the clichés associated with the German beer tradition, associate German beer with the oftentimes skunky Pilsners that make it to their American pint glasses.

They don’t realize the vast number of German beer styles available and the variety of beer that exists within those styles. At the same time, US beer lovers are intimately familiar with a number of British beer styles and are becoming increasingly enamored of Belgian style beers.

This is more than a disservice to German brewers. Despite their world-wide reputation as one of the great beer producing societies, sales are declining and German breweries are shutting down. According to Dornbusch, German drinkers are more and more turning to wine, liquor and mixed drinks. The past three decades have seen a significant decline in the number of German breweries.

The German vs. U.S. Beer Markets

The differences between the German beer market and the U.S. beer market are as much generational as they are cultural.

The craft beer revolution that continues to transform the U.S. brewing culture into one of the most exciting in the world is still driven by the pioneers that ignited it in the 1970s and 80s.

It retains a youthful vitality which is reflected in every aspect of the beer, from blending of styles and brewing techniques to exciting, eye-catching labels.

Conversely, German beer has depended on the same business model for generations. As German drinkers increasingly turn their backs on the stodgy drink of their elders, this once dependable way of doing business is failing German brewers and they need to find a market elsewhere or stop brewing beer.

The Issues of Importing German Beer

There is more to exporting beer than simply finding somewhere else to sell it. Brewing and selling beer locally in Germany avoids a lot of unrealized problems.

Dornbusch understands the new set of problems of shipping and marketing beer that German brewers face when they try to sell their beer to customers that live two continents and an ocean away. These problems include spoilage, packaging and marketing, and numerous legal issues surrounding alcohol sales in this country.

The Problem with U.S. Alcohol Distribution

The American distributor system is unique in the world. Dornbusch says that it is an “alien creature” to overseas brewers.

This system is a result of the strange history of alcohol in the U.S.: that love/hate relationship that Americans have had with alcohol from the beginning. This odd relationship culminated in Prohibition when a grassroots movement eventually led to a swell of public demand for a national prohibition against liquor, which was immediately and consistently violated by a huge portion of the citizenry.

The Brewery’s Tied House

A favorite whipping boy of the anti-alcohol crowd was the network of bars and taverns known as tied houses. Tied houses, which still exist in many other countries including Germany, are establishments that serve alcohol and are beholden to specific breweries.

This arrangement often grows out of the brewery financing the establishment’s startup costs and supplying the necessary materials for a bar to open for business.

from the booths and lighting fixtures to the glassware and welcome mat. The laissez faire capitalism and new shipping technologies of the late 19th and early 20th centuries fueled the beginnings of massive American breweries that would battle for territory marked by a tied house on virtually every corner.

These tied houses were true dens of iniquity. Picture every Starbucks exclusively serving Coors, Budweiser, or Busch and where, with a wink and nod, one can get into the back where gambling, prostitution and virtually anything else are freely available. This might be something of an exaggerated vision of the reality, but it was not in the perception of the Prohibitionists.

The Power of Distributors After Prohibition's Repeal

When Prohibition was repealed it was not simply a return to the status quo. Lawmakers felt that there needed to be a way to prevent a return to the tied house system because it allowed too much control by the breweries. So, the distributor system was born.

To be sure, distributors had always existed, but this new system was an entirely new construct. It provided a clear buffer between the brewery and the retailer and it eliminated the possibility of a return to the tied house system.

As a result, U.S. distributors today wield a great deal of power; far more than mere shipping companies which are the closest to the distributors’ equivalent in other countries.

In most cases, they are able to control what beer and alcohol products are sold in a particular area. To muddle the situation even further, laws governing distributors are different in each state.

The Challenges of Importing Beer

Given the confusing nature of the U.S. distributor system, it’s no surprise that brewers often need an intermediary when trying to export their beer to the U.S. market. This is where Dornbusch steps in to help.

The Fragile Nature of Shipping Beer

The chain of delivery is fairly simple:

  • The brewer hands their beer to an importer who has it shipped from the brewery and across the U.S. border.
  • The importer then hands the beer to the distributor who warehouses the beer and delivers it to retailers.

One of the big problems that the brewer faces in this system is that they loose control of their product from the time it leaves the brewery. Pure beer has a relatively short shelf life and is easily bruised. The temperatures that it can encounter during shipping are enough to ruin beer. Other issues that may arise are time and exposure to light. All of these elements seem to conspire to ruin beer.

Ruining a shipment of beer can do more harm than simply rendering a few cases undrinkable, especially if the brand is relatively unknown.

Consider the consumer who sees a new German import on the store shelves and picks it up. While she may be expecting a glorious German beer experience, she finds instead a stale, skunky beer. She is not aware that it might have begun as the beautiful beer she was expecting; she just knows that the beer is now terrible.

”The brand is destroyed,” Dornbusch explains, “but you see the distributor/importers don’t give a damn because brands are interchangeable. As long as that distributor has about 3 feet or 8 feet of warm shelf space in a given store, they can just cycle brands.”

Indeed, the importer and distributor do not have to be particularly interested in preserving a beer's quality and promoting the brand.

Far too often, their goal is to squeeze profit from a single transaction rather than building a long term relationship with the brewer.

In fact, Dornbusch says that he has seen brewers not only lose the initial investment of the beer and realize no profits from the transaction, but also receive bills from the U.S. companies for marketing and other considerations. He remembers one brewery that saw an estimated profit of $12,000 turn into a bill for $5,000!

The Dreaded Distributor’s Contract

Another challenge faced by foreign brewers, and shared with craft brewers trying to get off the ground, is that many of the 2,500 distributors in the U.S. today are what Dornbusch calls brand collectors.

With no real interest in selling the breweries’ beer to retailers, these distributors will sign an agreement with the brewers and order a few thousand cases of beer. Once the contract is signed it is very difficult for brewers to leave the distributor; however, the law makes it easy for the distributor to walk away.

So some distributors will deliberately collect brands by signing them while they truly have no interest in them.

This may be a way to protect their existing successful lines, or it could be that the distributors are waiting for demand for the brand to grow without them having to put any effort into it. Whatever the distributors’ motives, this is obviously a troublesome situation for the brewers.

Though it is difficult for brewers to get out of the contract, they can usually buy their way out. The cost of the buyout is often based on the number of cases bought by the distributor, usually around $25 per case. So, if the distributor agrees to take 3,000 cases of beer, the brewery has to pay $75,000 to get out of the agreement and try to look for another distributor who may or may not give it the same treatment.

Is There a New Solution for German Imports?

Dornbusch has developed a reputation for protecting breweries from such tactics. Besides going head-to-head with distributors and importers over such issues, he is also developing a new way for brewers to get their product to the American market.

Working with a consortium of five Bavarian brewers, he has worked out agreements with an importer and a distributor that will respect beer’s needs during shipping and storage. He calls the new arrangement Cold Track. The beer will be kept cool from the time it leaves the brewery until it hits the retailers’ shelves.

Beer brought into the U.S. from Germany using the Cold Track system will carry the Cold Track trademark, a penguin carrying a tray of beer. It will be his promise to the consumer that the beer will be in the best possible condition for drinking after making its journey.

Understanding the New Market Culture

Dornbusch’s understanding of the U.S. and German beer cultures is perhaps his greatest asset. He can identify with the culture shock that his German clients’ beer will encounter. For instance, “What do Americans look for?” he asks about beer labels. The answer is, quite simply: “The brand and the style.”

This is something that German brewers just cannot seem to understand.

The vast majority of German beer has been brewed and sold locally for generations. German beer drinkers grow up knowing what kind of beer the local brewery makes and the brand or brewery’s label on the bottle is all that they need to see to know what’s inside. But the beers’ reputations rarely extend beyond the local region.

The truth of branding in the U.S. market does not occur to German brewers who have successfully sold their beer this way for centuries. They don’t really see any reason to change now.

The Decline of German Beer Drinking

Change they must if they wish to survive. The beloved tradition of German beer drinking is on its way out, Dornbusch says. When asked if this isn’t a cyclical trend that will soon correct itself, he answers emphatically. “It’s not cyclical. It’s been a 30-year trend,” he says. “It hasn’t been a cycle.”

Per capita, beer consumption has fallen by about 20 liters over the past decade and it continues to fall as the younger generations turn their back on their parents’ and grandparents’ drink.

Thirty-five years ago, 3,500 breweries were operating in Germany; today only 1,250 remain. The future seems grim for German brewers unless they can break into foreign markets, a prospect that most of them have not historically had to worry about.

This lack of exporting experience is keenly reflected on the shelves of U.S. beer stores where German beer is greatly underrepresented.

As craft beer and imports from Mexico, Holland and Canada gobble up more and more valuable shelf space, German beer has barely budged in a market that, by all accounts, is clearly turning toward more flavorful beers.

As the country and society universally recognized for their brewing, it is a shame that imported German beers are in such a state in the U.S. beer market.

New Opportunities on the Horizon

If Dornbusch has anything to say about it, this will soon change. Not only is he working to bring more German beer to the U.S. market, but he also predicts that German beer styles will be the next step for U.S. craft brewers.

With a few exceptions, the styles of the craft beer movement in the U.S. have followed an eastward trail across Europe. The early craft brewed beers were mostly English style ales. This is understandable as these beers are full of flavor and were a great foil to the watery beer that dominates the U.S. market. These beers are also cheaper and easier to make, handy for an industry that was inventing its own way.

Later, the Belgian beer wave hit. Belgian beers are less susceptible to damage during shipping and beer drinkers loved them. The styles from Belgium gained a mystique and craft brewers answered the growing demand. Today, some of the best Belgian-style beer in the world is brewed in the U.S.

”And just as the Belgian wave is now flattening out, I think the next wave is going to be German beer,” Dornbusch says. “The German wave has to happen because it’s the only one left that is potentially big. I am sure either the consumer is going to pull that wave along or the craft brewers will, having reached the point where they say ‘What can we do next?’”

It may not happen in the next month, but look for more German beer styles on U.S. store shelves. Whether it is imported or brewed by craft brewers, if it’s a quality beer, chances are Horst Dornbusch had something to do with putting it there. Prost!

Originally Published: September 23, 2007